AAPL Stops On A Dime

Two months ago, Joe Springer of Seeking Alpha called out January 18, today, as a point of interest in the trajectory of Apple’s stock price. He suggested that because of a particularly large number of open AAPL options expiring today, this would be a turning point: the stock price would remain artificially deflated through today, and then rise more organically starting next week.

Earlier this week, John Gruber of Daring Fireball linked to the post and gave his own summary of the situation:

Billions of dollars at stake if AAPL stays near or under $500 a share until January 19 and then makes a run after that. No tinfoil hat required to see the motivation here.

I’m not sure where the $500 number comes from, because it wasn’t cited in the original article. I suspect that Gruber did some more research and determined that in the months since Springer’s article, $500 had become the most popular option price among investors, and thus carried the heaviest weight among the variously-priced options set to expire today.

Today, Apple’s stock price closed at exactly $500. Sometimes the way things unfold seem too precise to be merely coincidence, and Gruber’s reaction to the news says as much:

I still have that bridge to sell you if you don’t think the fix was in on this.

But was it a fix, or merely an “honest” market doing what markets do? I don’t claim to know too much about the perplexing ebbs and flows of the stock market, particularly when it comes to options, but this article by Rocco Pendola offers a counterpoint to the conspiracy angle, taken verbatim from his interview in 2011 with Neil Pearson:

Neil Pearson: Let’s use AAPL as an example. Friday, AAPL’s closing price was near $340. Further, let’s suppose that there is a large trader or group of traders who follow a hedging strategy that requires them to sell aggressively if AAPL rises above $340, and buy aggressively if AAPL falls below $340. If this is the case, their trading will have a tendency to “pin” AAPL at or near $340. It is only a tendency, because during the week there might be some event, either a news announcement or trading by some other investors, that dwarfs the effect of the hedging strategy and moves AAPL away from $340.

In other words, Pendola agrees that the large number of open options had a part in pushing the stock price to $500, but insists that the fact that it closed precisely on that number was hardly guaranteed or “fixed” as Gruber suggests.

Because Pendola and Pearson are experts in stock analysis, who have covered precisely this topic before, even to the extent that Apple was previously the subject, I tend to respect their conclusion. I also noticed that in after-hours trading, AAPL hasn’t begun rocketing upwards. If there were some conspiratorial manipulation of the stock to keep it at $500 only through close of trading today, one would imagine it would have traded higher than $500.31 after-hours.

I was as quick as anybody to jump on the conspiracy wagon when the stock closed exactly at $500, but sometimes truth really is stranger than fiction.